Explore whether a 5 year SIP with a smaller loan outperforms a 15 year home loan when buying a 35 lakh home. A smart guide to save more.
For most middle-class Indians, buying a home is both an emotional goal and a major financial decision. The most common route is a long-term home loan, but increasingly, savvy investors are exploring an alternative: Systematic Investment Plans (SIPs) to build a corpus and take a smaller loan later.
But which strategy helps you get to your Rs 35 lakh home faster – and more efficiently?
In this article, we’ll compare two popular paths:
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A 15-year home loan
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A 5-year SIP followed by a small home loan
Let’s break it down with real numbers and realistic assumptions to find out what’s smarter for your money.
🔢 Key Assumptions for Fair Comparison
| Metric | Value |
|---|---|
| Home Price | ₹35 lakh |
| Down Payment | 10% (₹3.5 lakh) |
| Loan Amount (Full Loan) | ₹31.5 lakh |
| Home Loan Interest | 8.5% p.a. |
| SIP Return | 11% CAGR |
| Property Appreciation | 5% annually |
| SIP Duration | 5 years |
| Loan Tenure (if needed) | 10 years (after SIP) |
| SIP Amount = EMI Amount | ₹31,041/month |
Let’s assume you make a 10% down payment of Rs 3.5 lakh and take a 15 year home loan for Rs 31.5 lakh at 8.5%.
💰 EMI Calculation:
EMI = ₹31,041/month
💸 Total Cost of Buying:
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Total EMI over 15 years = ₹31,041 × 180 = ₹55.87 lakh
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Add Down Payment = ₹3.5 lakh
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Total Outgo = ₹59.37 lakh
📈 Property Value After 15 Years:
₹35 lakh × (1.05)^15 = ₹72.73 lakh
📈 Option 2: Invest in SIP for 5 Years, Then Take a Small Loan
Here, you invest Rs 31,041/month via SIP for 5 years and then buy the same house using the SIP corpus and a small top-up home loan.
💰 SIP Investment:
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Monthly SIP = ₹31,041
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Duration = 60 months
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Total Invested = ₹18.6 lakh
At 11% CAGR, the future value = ₹25.63 lakh
🧾 Capital Gains Tax:
Gain = ₹25.63 lakh – ₹18.6 lakh = ₹7.03 lakh
LTCG = 10% × ₹7.03 lakh = ₹70,300
Net Corpus = ₹24.93 lakh
🏠 Home Price After 5 Years:
₹35 lakh × (1.05)^5 = ₹44.66 lakh
🏦 Additional Loan Needed:
₹44.66 lakh – ₹24.93 lakh = ₹19.73 lakh
💳 Loan Details:
Loan Tenure = 10 years
Interest = 8.5%
EMI = ₹24,582/month
Total EMI over 10 years = ₹29.5 lakh
Total Outgo = ₹18.6 lakh (SIP) + ₹29.5 lakh (EMIs) = ₹48.1 lakh
🔁 15-Year Home Loan vs SIP + Small Loan: Quick Comparison
| Feature | 15-Year Home Loan | SIP for 5 Years + Loan |
|---|---|---|
| Monthly Outgo | ₹31,041 | ₹31,041 (5 years), then ₹24,582 |
| Total Duration | 15 years | 5 years SIP + 10 years loan |
| Total Cost | ₹59.37 lakh | ₹48.1 lakh |
| Final Asset Value | ₹72.73 lakh | ₹72.73 lakh |
| Loan Amount | ₹31.5 lakh | ₹19.73 lakh |
| Debt Burden | High | Moderate |
| Liquidity | Low | Medium |
| Tax Benefit | Yes | Partial |
| Flexibility | Low | Higher |
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You invest, not borrow, during your early years, helping you build wealth.
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Capital gains tax is minimal because your gains are spread over years and taxed at only 10%.
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Lower loan amount = lower EMI + lower interest – you save lakhs.
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Flexibility to walk away: If plans change in 5 years, your money is still yours, unlike a sunk cost EMI.
⚠️ When is the 15 Year Home Loan Better?
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If real estate prices are skyrocketing and you fear being priced out.
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If you value immediate ownership, emotional security, and tax deductions more than long-term savings.
💡 Hybrid Tip: Start with SIP, Combine with Smaller Loan
If you can delay your purchase by just 5 years, you reduce your debt load by over Rs 11 lakh. That’s the equivalent of saving nearly 3.5 years of EMI payments.
📌 Conclusion: Should You Invest First or Borrow Now?
The numbers speak clearly.
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15-year home loan: You pay more, own now, and commit to a long financial obligation.
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5-year SIP + small loan: You build wealth, buy smarter, and reduce total costs significantly.
For those who can afford to wait and plan, a SIP-driven strategy wins – hands down.
📢 Disclaimer:
Investing in mutual funds is subject to market risks. Please consult a qualified financial advisor before making investment decisions.
